CHLA Writes FHA Commissioner Montgomery to Suggest Priorities for FHA – 5/30/18

CHLA Writes FHA Commissioner Montgomery 

to Suggest Priorities for FHA

Contact: Scott Olson                                                    For Immediate Release 

571-527-2601                                                             May 30, 2018

The Community Home Lenders Association today sent a letter  to FHA Commissioner Brian Montgomery congratulating him on his recent Senate confirmation – and offering CHLA views and recommendations on FHA priorities.
The CHLA letter cited three top priorities which it suggests FHA pursue:
“(1)   Address premium overcharging to borrowers in the FHA Forward Loan program, by reducing annual premiums to .55% and ending its Life of Loan premium policy.
 (2)   Protect FHA’s critical access to credit role, rejecting calls to artificially reduce its footprint through policy changes such as limiting loans to 1st-time homebuyers, increasing premiums, reducing loan limits, and other constrictive actions.
 (3) Make other important policy changes, including finalizing pending proposed condo flexibility changes, increasing the permissible lender assumption fee from $900 to $3,000, and asking Congress for an extension of lapsed authority under HERA to use $25 million a year in FHA profits for IT and other technology upgrades.”

 In renewing its call for lower annual premiums and ending Life of Loan, he CHLA letter argued that FHA borrowers are being overcharged on premiums, citing strong performance metrics which include: (1) an Administration-projected profit of 3.2% on each new FHA loan, producing over $7 billion in next profits in FY 2019, (2) 2017 Actuarial Report analysis showing the Forward program has over $38 billion in economic worth – with a 3.3% Capital Ratio, and (3) continuing significant declines in delinquency and claims rates.
CHLA pointed out that if FHA is concerned about the the overall MMIF ratios, it could offset the cost of a reduction in annual premiums by an increase in the upfront premium – which, combined, would improve loan affordability, and end up increasing revenues through higher volume
CHLA’s second priority – protecting FHA’s access to mortgage credit role – warned against arbitrary actions to reduce FHA’s footprint – citing FHA’s statutory requirement to balance both meeting borrower needs and reducing risk.  The letter also argued that the goal of having more private capital in mortgage markets could best be achieved through efforts like the recent QM exemption for banks and GSE risk sharing – instead of simply reducing FHA in the hope that the private sector will step in to fill in the gap.
The CHLA letter closed by citing the need to finalize pending proposals to make FHA condo loan rules more flexible, to raise the permissible lender fee on FHA loan assumptions, and to ask Congress to re-instate lapsed authority under the 2008 HERA legislation to use $25 million a year out FHA’s over $7 billion in profits to do IT upgrades and other needed technology improvements.